New platform to business regulations
From 12 July 2020 when the new Regulation on promoting fairness and transparency for business users of online intermediation services come into force…
Online intermediation services (social media services, online e-commerce marketplaces, software application services (“OIS”)) and online search engines play a key role in retail and the electronic supply chain. Their prevalence will doubtless only increase with the ever growing use of internet shopping (Amazon alone having recruited an extra 175,000 workers to assist with deliveries in lockdown), and a potential increase in entrepreneurialism and individuals setting up micro businesses in the wake of COVID related job losses.
Search engines, social media and e-commerce platforms are the most visited platforms in the world. Trading via platforms such as Amazon, eBay and etsy is a relatively easy route to market for SMEs involving no real estate outlay, an established marketplace and means of advertising, and easy methods of payment. A 2015 report by Copenhagen Economics estimated that 60% of private and 30% of public purchase of goods and services bought digitally were via platforms. This in our view will have increased over the past five years and in particular during lockdown with growing trust and confidence in these established brands of platform and their processes for buying and delivery.
Whilst individual buyers via platforms are protected by consumer regulation, business users selling via platforms have not to date enjoyed any specific protection. This changes from 12 July 2020 when the new Regulation on promoting fairness and transparency for business users of online intermediation services come into force (the “OIS Regulation”).
The aims of the OIS Regulation are to:
- establish a fair online business sales environment with enhanced transparency;
- maintain and encourage an innovative online sales environment; and
- prevent regulatory fragmentation, as some EU states were starting to introduce their own domestic rules for OIS providers (although, that said, there is discretion for EU states on how they implement the OIS Regulation).
The Commission has stated that it will monitor whether the obligations introduced by the OIS Regulation are enough, or whether further measures are needed.
After the Brexit transition period, most of the OIS Regulation will remain in force as part of the European Union (Withdrawal) Act 2018. It is possible that it may be changed by the UK government in future, but the OIS Regulation will continue to apply to UK based platforms which provide OIS to EU based businesses and consumers.
Who must comply with the OIS Regulation?
The OIS Regulation applies to online search engines and OIS providers which engage with businesses and consumers within the EU. An OIS provider is a business which:
- provides an information society service (being a service at a distance, by electronic means, at the individual request of the recipient of the services and usually for remuneration);
- allows businesses to offer goods or services to consumers; and
- enters into contracts with business users.
Examples of OIS providers include online e-commerce market places such as eBay, Amazon and Booking.com, software applications services such as Apple App Store and Google Play and online social media services such as Facebook, LinkedIn and Twitter.
The OIS Regulation does not apply to a number of situations including peer to peer or business to business platforms, online payment services, advertising tools or advertising exchanges which do not facilitate direct transactions between businesses and consumers.
Terms and conditions (Article 3)
The OIS Regulation applies to OIS providers who contract with businesses on their standard terms and conditions, and sets out a number of requirements for those unilaterally imposed terms and conditions.
OIS providers are required to ensure that their terms and conditions:
- are drafted in plain and intelligible language;
- are easily available to business users at all stages including before entering into the contract;
- set out the grounds for decisions to suspend or terminate or otherwise restrict (including partially) the provision of OIS to business users;
- contain information about any additional distribution channels (including affiliate programmes) which the OIS may use to market goods and services offered by business users;
- contain a number of provisions detailed within the OIS Regulation including but not limited to internal complaint handling, mediation services, and access to data post termination;
- comply with detailed requirements in relation to termination; and
- include general information covering the impact of ownership and control of intellectual property rights of business users.
Changes to terms and conditions, if made unilaterally, must comply with detailed notice provisions set out in the OIS Regulation.
Article 9 sets out requirements in relation to personal data, which are without prejudice to the obligations within GDPR.
OIS providers must include in terms and conditions the key factors they consider when determining ranking (although there is no requirement to reveal algorithms).
Online search engine providers must have an easily and publicly available description, on the search engine, setting out how they determine ranking and any way in which ranking can be influenced by remuneration.
Codes of conduct and review
The EU Commission will encourage (but not require) OIS providers to draw up and comply with codes of conduct, and will evaluate and report on the OIS Regulation within 18 months and then every three years.
Any terms and conditions which are non-compliant are void meaning that the OIS provider cannot enforce these against the business user.
If a business user suffers loss or damage due to a breach by the OIS provider of the OIS Regulation, it can bring a claim for breach of duty against the OIS provider.
Public bodies and organisations which are non profit making and represent business users can take action to enforce the OIS Regulation in national courts and seek injunctions.